Ventas Sells 5 Senior Housing Facilities to Emeritus for $62M

Ventas Inc. has sold five senior housing assets with a total of 432 units to Emeritus Corp. for $62.5 million. Emeritus had been leasing the facilities, located in four states, from Ventas. The Chicago-based healthcare REIT also announced Monday that it had agreed to sell Samaritan Hospital in Lexington, Ky., to the University of Kentucky for $35 million in an all-cash transaction. If completed, Ventas expects to gain approximately $18 million from the sale. The transaction could close in the first quarter of 2009. As reported Aug. 4 by CPN, the sale of the five assisted living communities to Emeritus had been in the works since the summer. There are two facilities in Florida and one each in California, Ohio and Michigan. The transaction is part of Emeritus’ long-term strategy of buying communities it leases where appropriate. During Emeritus’ third-quarter conference call with analysts on Nov. 10, CFO Ray Brandstrom said the strategy “allows us to capture and retain value over long periods of time. Thus, over time, we’ll continue to selectively pursue acquisition opportunities that make good business sense.” The purchase price represents a 6.7 percent capitalization rate on current annualized cash rent of $4.2 million. Ventas expects to record a gain of approximately $23 million on the sale, the company stated in a press release. The REIT said net cash proceeds of about $45 million would be used to pay down debt or for general corporate purposes. The deal called for Ventas to be released from approxim tely $7 million of existing mortgage debt. Ventas also provided a $10 million loan to Emeritus that bears interest at an average rate of 8.25 percent, is payable monthly and matures in three years. Emeritus will continue to lease 11 other senior housing facilities from Ventas. “Both Ventas and Emeritus benefit from this transaction,” Debra Cafaro, Ventas CEO & president, said in the release. “The price received by Ventas for its senior housing assets is attractive, and the customer Emeritus is able to take advantage of a favorable financing market for seniors housing and enjoy ownership of more real estate assets.” Emeritus has been on a buying spree, which started in September 2007, when it merged with Summerville Senior Living Inc. and announced nine additional acquisitions at the same time. CPN reported Oct. 22 that it has closed on the second part of a $299 million acquisition of 29 communities with a total of 2,257 units from Health Care REIT Inc. The second part of the deal was for 10 assisted living facilities with 693 units at approximately $77.2 million. Emeritus currently operates 302 communities in 36 states representing capacity of approximately 26,700 units and 31,600 residents. Meanwhile, Ventas, which operates in 43 states and two Canadian provinces, has been making a concerted effort to refinance senior notes and loans maturing within the next two years as well as paying down its debt. So far this year, Ventas has repaid $143 million of secured debt and purchased at a net discount $176 million aggregate principal amount of senior notes due in 2009 and 2010. CPN had reported Dec. 8 that Ventas had closed eight first mortgage loans totaling $126 million through Freddie Mac on eight senior housing communities in three states managed by Sunrise Senior Living Inc. The proceeds of that loan were used to repay in full $71 million of existing debt, secured by the same facilities that was due to mature in mid-2009.